Timor-Leste

The Portuguese began to trade with the island of Timor in the early 16th century and colonized it in mid-century. Skirmishing with the Dutch in the region eventually resulted in an 1859 treaty in which Portugal ceded the western portion of the island. Imperial Japan occupied East Timor during 1942-1945, but Portugal resumed colonial authority after the Japanese defeat in World War II. East Timor declared itself independent from Portugal on 28 November 1975 and was invaded and occupied by Indonesian forces nine days later.

It was incorporated into Indonesia in July 1976 as the province of East Timor. An unsuccessful campaign of pacification followed over the next two decades, during which an estimated 100,000 to 250,000 individuals lost their lives. On 30 August 1999, in a UN-supervised popular referendum, an overwhelming majority of the people of East Timor voted for independence from Indonesia. Between the referendum and the arrival of a multinational peacekeeping force in late September 1999, anti-independence Timorese militias - organized and supported by the Indonesian military - commenced a large-scale, scorched-earth campaign of retribution.

The militias killed approximately 1,300 Timorese and forcibly pushed 300,000 people into West Timor as refugees. The majority of the country's infrastructure, including homes, irrigation systems, water supply systems, and schools, and nearly 100% of the country's electrical grid were destroyed. On 20 September 1999 the Australian-led peacekeeping troops of the International Force for East Timor (INTERFET) deployed to the country and brought the violence to an end. On 20 May 2002, East Timor was internationally recognized as an independent state.

In late 1999, about 70% of the economic infrastructure of East Timor was laid waste by Indonesian troops and anti-independence militias, and 260,000 people fled westward. Over the next three years, however, a massive international program, manned by 5,000 peacekeepers (8,000 at peak) and 1,300 police officers, led to substantial reconstruction in both urban and rural areas.

By mid-2002, all but about 50,000 of the refugees had returned. Growth was held back in 2003 by extensive drought and the gradual winding down of the international presence. The country faces great challenges in continuing the rebuilding of infrastructure, strengthening the infant civil administration, and generating jobs for young people entering the workforce.

One promising long-term project is the planned development of oil and gas resources in nearby waters, but the government faces a substantial financing gap over the next several years before these revenues start flowing into state coffers.